Ind AS 27 governs the separate (standalone) financial statements a parent prepares in addition to its consolidated statements, and requires investments in subsidiaries, joint ventures and associates to be measured, for each category of investment, either at cost, in accordance with Ind AS 109 (fair value through profit or loss or through OCI), or using the equity method — the audit has to confirm which basis was elected, that the same basis is applied to every investment within the same category rather than cherry-picked investment by investment, and that any change in basis is accounted for as a change in accounting policy under Ind AS 8.
Testing procedures by elected basis
- 01If measured at costConfirm the investment is carried at cost less any impairment, and is not adjusted for the investee's subsequent profits or losses — dividend income from the investee is recognised in profit or loss when the right to receive it is established, and should be tested as a potential indicator of impairment where the dividend exceeds the investee's total comprehensive income in the relevant period.
- 02If measured under Ind AS 109Confirm the fair value measurement and classification (FVTPL or FVOCI, as irrevocably elected at initial recognition) is consistent with how similar investments are treated elsewhere in the standalone financial statements, and that the valuation inputs for an unquoted investment are independently assessed.
- 03If measured using the equity methodConfirm the carrying amount is adjusted for the parent's share of the investee's post-acquisition profit or loss and OCI, consistent with how the equity method is applied under Ind AS 28 for the same investee at consolidated level.
- 04Check consistency across the investment categoryAn entity cannot use cost for one subsidiary and fair value for another within the same class of investment without a documented, policy-level justification — spot-check this across the investment schedule.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 600: group audits, and the group auditor's responsibility for component auditors' workUsing another firm's work on a subsidiary doesn't transfer responsibility for the group opinion. SA 600 is explicit about what stays with the group auditor regardless.
- Related parties & disclosuresCommon-control entities: why they raise audit riskA promoter running several unlisted entities under common control creates a structure where money, not just transactions, can move without much friction. That is the risk to test for.
- Related parties & disclosuresIdentifying related parties: the audit starting pointA client declaration is a starting point for the related-party list, not evidence of it. How to build and cross-check the list independently.
- Fixed assets & capexInd AS 40: investment property, and why it's classified by purpose, not by typeThe same physical building can be investment property or ordinary PPE depending entirely on why the company holds it — the classification question is purpose, not bricks.
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